How to Mend America's Broken Urban Areas

A bipartisan plan would replace bureaucracy with incentives to families, business, and faith-based groups

May 20, 1997

By Spencer Abraham and Joseph Lieberman

The tragedy of our most distressed urban areas - filled with broken homes, drugs, violence, and welfare dependency - has been pointed out so often that some Americans now accept it as normal.

But broken families are not normal, and neither is the hopelessness and the breakdown of institutions and standards that lie at the root of community decay. We can and must work to revive and renew our poorest communities, both for the sake of the people living there and for the Americans living in our less-distressed suburban areas, already seeing their own families and communities affected by the decline of our cities.

A major source of disillusionment has been the failure of the last two generations of anti-poverty programs. We spent billions over nearly four decades on these social programs, ending up with essentially the same poverty rate. The problem was not that we did not fight hard enough. Neither was it that community decay is an unbeatable adversary.

Rather, the problem has been that the programs too often addressed symptoms, not underlying causes, and they too often relied on "top down" bureaucratic programs run from Washington.

The "Washington Knows Best" attitude has been a recipe for failure because too often it takes power and responsibility away from the people who need them most: residents of our distressed areas. Washington can neither "end" poverty nor provide the reward system of hard work, the supporting institutions of neighborliness, faith, and family, and the willingness to seize personal responsibility necessary for community renewal. But Washington can do more to free local entrepreneurs, workers, and community leaders to reconstruct the fundamental institutions, beliefs, and practices on which any community must rely.

Such thinking lies behind our "American Community Renewal Act of 1997." Our bipartisan legislation is cosponsored by Reps. J.C. Watts (R) of Oklahoma, Jim Talent (R) of Missouri, and Floyd Flake (D) of New York. Our bill will create 100 "community renewal zones" with targeted, pro-growth tax and regulatory relief, housing assistance, and provisions encouraging charitable giving, savings, education, and investment. It also aims to strengthen family ties and fight drug abuse by reintegrating faith-based institutions into the public life of impoverished communities.

To qualify, a community first must have abnormally high poverty and unemployment rates. Second, it must reduce local taxes and fees, and eliminate state and local sales taxes. Finally, the community must waive economic regulations (such as various licensing provisions) that limit people from entering new fields and businesses, unless those regulations are needed to protect public health and safety.

Congress and the administration enacted enterprise zone legislation in 1992. But it targeted only a handful of zones in a handful of cities. This is not a broad enough base for a serious experiment in what works. Our bill, with 100 zones, provides that base.

In return for reforms, a community will receive a number of benefits:

* First, a capital gains tax rate of zero for the sale of any qualified zone stock, business property, or partnership interest held for at least five years.

* Second, increased expensing for purchases of plant and equipment in the community.

* Third, a 20 percent wage credit for local businesses hiring qualified low-income workers from within a zone who remain employed for at least six months.

* Fourth, a "brownfields" provision allowing taxpayers to expense costs incurred in cleaning up contaminated sites in a zone.

* Fifth, a provision allowing financial institutions to receive Community Reinvestment Act credit for investments in, or loans to, community groups within a zone. (These groups would then provide loans and/or credit to local small businesses).

All of these provisions would encourage investment and job creation within the zones.

Important as they are, however, investment and job creation are not enough. That is why the American Community Renewal Act also encourages initial steps toward a resuscitation of charitable giving, family life, educational opportunity, and participation by faith-based organizations. To begin with, the bill makes up for tax-code revisions that eliminated the charitable deduction for non-itemizers and restricted it for itemizers. It includes a tax credit of 75 cents per dollar, up to $200, of cash contributions to qualified poverty-fighting charities.

The bill also provides for the sale of unoccupied or substandard local HUD homes and housing projects to community development corporations, including church entities. This should help increase housing opportunities for low-income families, encouraging them to stay together and to care for both their homes and neighborhoods by making them homeowners.

In addition, the bill creates family development accounts. These super-IRAs will encourage saving among low-income families. Cash donations would be deductible and withdrawals tax free for such purposes as buying a house or meeting educational expenses. A means-tested school choice scholarship program will allow low-income parents the opportunity middle-class parents now have: to send their children to a school of their choice.

Finally, our bill recognizes the importance of faith-based voluntary organizations to any community. These organizations often are far more effective than government programs at treating public and private ills.

For example, in San Antonio, pastor Freddie Garcia runs Victory Fellowship. This faith-based drug rehabilitation program offers addicts from tough neighborhoods a safe haven, a chance to recover, job training, and a chance to provide for themselves and their families. Thirteen thousand people have been helped there, with a success rate of more than 80 percent. But, because Victory Fellowship is faith based, it gets no federal help, and no one receiving federal assistance is allowed to go there.

THIS must change. Religious organizations are often the strongest surviving institutions in poor areas; the federal government must work with them. Our bill protects individuals' rights not to be required to receive religiously-oriented treatment.

We refuse to give up on our poorest neighbors. Recognizing that a government check cannot bind families or neighborhoods together, we are convinced that a more innovative, locally-oriented program can succeed where federal bureaucracies have failed. By reducing tax and regulatory burdens and increasing opportunities for education, saving, and home ownership, we can make possible a renewal of our communities - and with them our nation.

* Spencer Abraham is a Republican senator from Michigan and Joseph Lieberman is a Democratic senator from Connecticut.